Spain’s troubles far from resolved

A recession in Spain dragged into a fifth quarter even as the EU endorsed the country’s efforts to reduce the second-biggest deficit in the euro area, removing an obstacle blocking the path to a sovereign bailout, the government said yesterday.

Gross domestic product (GDP) fell 0.3 percent in the three months to September from the previous quarter, when it sank 0.4 percent, the National Statistics Institute said, confirming an October 30 estimate. Consumer spending fell 0.5 percent in the quarter.

EU economic and monetary affairs commissioner Olli Rehn yesterday endorsed an International Monetary Fund (IMF) call to slow the pace of austerity in the euro area’s fourth-largest economy only a week after demanding more budget measures. He said Spain’s measures were sufficient for now, even as the nation was forecast to miss deficit goals through 2014 with a 1.4 percent contraction this year.

Rehn also said the commission would reassess the situation in February given that steps to reduce overspending to 2.8 percent of GDP in 2014 had fallen short.

The commission sees Spain’s budget gap at 8 percent of GDP this year, down from 9.4 percent last year and compared with a 6.3 percent target.

Prime Minister Mariano Rajoy, who on Wednesday faced his second strike since coming to power last year, is resisting calls to request a second bailout, including pressure from the IMF, as he says the conditions for aid are not clear and support from the EU is not guaranteed. – Bloomberg